Motorhome Retirement Monthly Update For April, May And June

|
Includes: AAPL, ABBV, AMAT, BRK.B, NWL, T, UPS, XOM
by: GrayBeard Retirement
Summary

Three months since the last update.

Nearly $8,000 of investment income in three months and YTD income is up 8%.

Brought ABBV to a full position in late June.

The plan is on track but has backtracked since the March.

A short review

We plan to retire at age 54 in July 2020 and roam the country in our motorhome for a few years before settling into one location. Our plan consists of different time periods, each with a different investment purpose. They are:

  1. From age 54 to 59.5 we will not yet be able to withdraw from IRAs and will not have social security income. During this critical time period, income will be limited to cash savings and income from a small portfolio. We will spend all or part of this time traveling the country in our Motorhome. I call this the Motorhome Period.
  2. From age 59.5 to 62, we can withdraw from IRAs but will not have social security income.
  3. From age 62 and older, we can withdraw from IRAs and will have social security income. During this potentially long time period, the plan must be more dynamic as we respond to market conditions.

First, I will update the totality of the holdings, and later, the progress on the Motorhome Period plan will be updated.

A busy couple of months

When I looked back for the last update, I was a bit surprised to see the last one was for March. I knew that I had missed May’s update but had forgotten I missed April. Anyway, it has been a busy couple of months in the GrayBeard family. Mrs. GrayBeard and I went on a cruise to Alaska in May and had a wonderful and overly indulgent time. The whole trip was one good time after another but of course the highlight was the trip into Glacier Bay.

Source: Author's Photo

Then in June, our daughter got married. Of course, she and Mrs. GrayBeard decided on a destination wedding at Walt Disney World. Mr. GrayBeard got to decide how to pay for it.

Author's Photo

So we loaded up the motorhome and headed for the campground right there on Disney property.

These events caused me to miss those monthly updates. We are going to get back on track now with a 3-month update and get back to monthly going forward.

Activity

There were a total of 47 dividends paid in the period for a total income of $7,991.86.

April, May and June Dividends

Company

Amount

3M Company (MMM)

$ 350.61

AbbVie (ABBV)

$ 454.63

Altria Group (MO)

$ 136.00

American Express (AXP)

$ 3.99

Apple (AAPL)

$ 88.55

Applied Materials (AMAT)

$ 52.00

Archer Daniels Midland (ADM)

$ 210.00

AT&T (T)

$ 416.67

Bank of Nova Scotia (BNS)

$ 92.28

Cardinal Health (CAH)

$ 359.30

Chevron (CVX)

$ 54.88

Cisco Systems (CSCO)

$ 281.51

Corning (GLW)

$ 81.01

Cullen Frost Bankers Preferred A (NYSE:CFR.PA)

$ 33.59

Emerson Electric (EMR)

$ 103.88

Enbridge Inc (ENB)

$ 219.04

Energy Transfer Pref C (ETPRC)

$ 46.09

Entergy Louisiana (ELC)

$ 60.94

Enterprise Products Partners (EPD)

$ 195.57

Exxon Mobil (XOM)

$ 440.00

Flowers Foods (FLO)

$ 202.73

Gabelli Equity Trust Preferred G (NYSE:GAB.PG)

$ 131.25

Gamco Global Gold Income Preferred B (NYSEMKT:GGN.PB)

$ 62.50

Genesis Energy (GEL)

$ 29.70

Genuine Parts Company

$ 256.96

Hormel Foods (HRL)

$ 63.00

Illinois Tool Works (ITW)

$ 200.00

Intel Corp (INTC)

$ 367.10

iShares 20+ year treasury bond ETF (TLT)

$ 16.94

iShares short treasury bond ETF (SHV)

$ 200.82

Johnson & Johnson (JNJ)

$ 387.50

Kimberly Clark (KMB)

$ 516.44

Newell Brands (NWL)

$ 57.73

Phillip Morris Intl (PM)

$ 42.18

Renaissance RE Holdings Preferred E (NYSE:RNR.PE)

$ 67.19

Royal Bank of Canada (RY)

$ 64.42

Southern California Edison (SCE)

$ 53.00

Southern Company (SO)

$ 62.00

Starbucks (SBUX)

$ 269.20

State Street Corp Preferred C (NYSE:STT.PC)

$ 65.62

Target (TGT)

$ 1.20

Thompson Bond Fund (THOPX)

$ 209.67

United Parcel Service (UPS)

$ 192.00

United Technologies (UTX)

$ 227.83

Verizon Communications (VZ)

$ 234.98

Walgreens Boots Alliance (WBA)

$ 244.64

Walmart (WMT)

$ 84.72

Total

$ 7,991.86

Source: Author Spreadsheet

Total investment income so far for 2019 is $15,989. This is an increase over 2018 of 8%. This is a bit short of my goal of a 10% increase. The dividend increases have been smaller this year than the previous few years. In addition to that, we lost a significant amount of income when TLP was acquired late last year. The effects of this can be seen in February and May in the chart below of investment income by month.

Source: Author

Dividend Increases

There were 7 dividend increases in the period.

Dividend Increases

JNJ

$ 0.90

$ 0.95

5.56%

XOM

$ 0.82

$ 0.87

6.10%

CAH

$ 0.48

$ 0.48

1.01%

AAPL

$ 0.73

$ 0.77

5.48%

FLO

$ 0.18

$ 0.19

5.56%

SO

$ 0.60

$ 0.62

3.33%

EPD

$ 0.4350

$ 0.4375

0.57%

Source: Author

All dividend increases are quarterly amounts and the percentages are also Year over Year except EPD. EPD has been raising its dividend each quarter, the annual rate of increases is greater than the 0.57% listed.

Purchases

Due to market conditions, the purchases of stocks made were relatively small adds to positions until the addition of ABBV toward the end of June.

Purchases

Shares

Price

ABBV

374

$ 66.99

T

100

$ 32.01

XOM

30

$ 76.77

SHV

226

$ 110.49

UPS

100

$ 95.00

Source: Author.

Mrs. GrayBeard's IRA accumulated enough dividends in cash to buy 100 shares of AT&T (T) as I continue to bring it to a full position.

I had not made many purchases lately in the Motorhome Portfolio High Yield account (more below) so I added few shares Exxon Mobil (XOM). The Dividend Aristocrat's yield is the highest it’s been in the last 20 years. They managed the oil bear market without issuing shares. There was some debt issued but they have been paying it down the last two years. These factors and the AA+ credit rating make me comfortable working XOM up to a full position.

I brought United Parcel Service (UPS) up to a half position when it dropped 10% from my initial purchase. I wrote an article on UPS in February. You can read it here.

AbbVie price has been under pressure because its blockbuster drug, HUMIRA will soon be losing exclusivity and facing competition from generics. In late June, the company entered into an agreement to purchase Allergan (AGN). The market reacted adversely to this development and ABBV was down as much as 15%. It has since recovered some but is still below its preannouncement price.

The reasons we completed our position in ABBV are:

  1. S&P credit rating of A- or better
    • ABBV passes here with an A- rating, however with the additional debt that will be issued to purchase AGN, it may come under review for a downward move.
  2. Current dividend yield of 2.9% or higher
    • ABBV passes with a yield of 5.7%.
  3. Market capitalization of $5 billion or more.
    • ABBV passes here at $109 billion
  4. Dividend growth, recession performance and payout ratio
    • ABBV passes here with 5yr CAGR dividend growth of 19% and a payout ratio of 50%. There is no way to judge recession performance because ABBV was not a stand-alone company during the last recession.
  5. Relative valuation
    • I had looked at ABBV’s valuation in early June and interestingly it was priced for no growth beyond 2020 by my DCF method.

Due to these factors, I was considering adding to our position. When it dropped into the mid $60’s I made the purchase to bring it to a full position.

Sells

There were 4 sells during the period.

Sells

Shares

Price

BRK.B

10

$ 207.65

AMAT

260

$ 40.54

NWL

251

$ 14.74

AAPL

115

$ 182.10

Source: Author

Berkshire Hathaway (NYSE:BRK.B) is our largest holding at 10% of all investments. It has not been discussed before now because it is not a dividend paying position. I have decided to work this position down to around 5%. I plan on doing this at a rate of about 10 shares per month.

I have been holding Apple (AAPL) mainly for the dividend growth potential. In my view, management signaled their intention to lower the growth rate with the last increase of less than 6%. This despite having around $80 Billion in cash on the balance sheet. I can redeploy this into higher yielding assets to increase investment income and most likely reduce volatility.

Newell (NWL) and Applied Materials (AMAT) were being held as value holdings and I was waiting for the market to reprice them. However, the risk of geopolitics and trade wars causing the market to decline is too high for me to hold two stocks I do not believe in long term.

The Motorhome Period

This time frame has its own plan. You can read about it here. The discussion of the Motorhome plan starts about one third the way through the article.

All activity in this portfolio is included in the review of the total portfolio above. The composition and income from the high yield portfolio is summarized in the figure below.

Source: Author Spreadsheet.

The annualized income in this account increased from $6,459 in March month to $6,613 as a result of the purchase of XOM shares and dividend increases for XOM, EPD and SO. This income will be used with cash savings to fund the Motorhome Period. There is more cash in this account than I would like. It is getting difficult to find fairly valued reliable dividend stocks in this market. I will continue to look for opportunities in the market, but I will remain patient until I find them. The plan calls for the annual income from this account to be about $7,700 by the time we retire, but I would like for it to be closer to $10,000. I created the following table to track the progress of the plan. Included in the cash savings are the 401-k accounts as we will withdraw our 401-k accounts penalty free in the year we turn 55. You can read about our plan for avoiding the penalty here. The description starts a few paragraphs into the article.

How is the plan tracking?

Source: Author Spreadsheet

At the end of March, we were over a month ahead of schedule. Now we are just barely on schedule. This backtracking is because some of the cash savings had to be used to pay for the wedding of our daughter and the cruise to Alaska. There are no regrets over this in the GrayBeard household. I can think of very few things on which I’d rather spend savings.

If you enjoyed this article and wish to receive updates on our latest research, click "Follow" next to GrayBeard Retirement at the top of this article.

Disclosure: I am/we are long ALL STOCKS LISTED EXCEPT AMAT, NWL, AGN AND AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.